HOW TO TAKE CONTROL BACK FROM OIL

Mobility Choices for a Secure America
Anne Korin and Deron Lovaas, 3 December 2009 (Mobility Choice)

SUMMARY
You must remember this. There are 2 things everybody everywhere along the political spectrum agrees on: (1) Casablanca (“You must remember this/A kiss is just a kiss…” is an amazing, unforgettable movie (We’ll always have Paris…) and (2) Dependence on oil is a threat to U.S. security.

A lot of the world’s people keep winding up in Casablanca-like circumstances because of the struggle for control of Middle East oil. Anne Korin and Deron Lovaas, the authors of Mobility Choices for a Secure America, believe a significant change in the nation’s transportation system and infrastructure is necessary to change U.S. oil dependence. They propose 10 concrete things U.S. policymakers can do to change transportation and interrupt oil dependence. By doing so, policymakers can also stimulate U.S. economic competitiveness, promote energy efficiency and harvest clean, inexpensive domestic energy.

The single guiding concept to the critique is that oil can be disempowered by stripping it of its unfair competitive advantages in the marketplace.

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Korin and Lovaas begin with 4 principles that would change the transportation marketplace:
(1) Price the true costs of transportation goods like oil and eliminate advantages to oil from subsidies.
(2) Base federal investment on and charge for the actual use of federal resources like roads and bridges.
(3) Make municipalities accountable for better performance because that is where the most traffic is and where the most oil use happens.
(4) Deploy technology to make taxpayer investments in transportation more efficient.

These principles are the basis for 10 policy recommendations:
(1) Make the price of fuel include the cost burden for securing oil.
(2) Deploy “HOT” lanes and create charges for use of oil consuming infrastructure, especially at times of higher congestion.
(3) Maximize public transportation spending to minimize oil consumption.
(4) Allow auto insurers to reward drivers that reduce oil consumption.
(5) Provide transit vouchers to low-income households.
(6) Reward drivers for the trip not taken through encouragement of online employment and transactions.
(7) Funnel gas tax revenues to high traffic areas in ways that maximize oil consumption reductions.
(8) Change local land-use rules and laws to facilitate increased use of public transportation, biking and walking.
(9) Use smart traffic management.
(10) Use electric rail transport where it is cost-effective and cuts oil consumption.

Footnote: The proposal raises an interesting question: Would a federal “national security” fee charged for the import of every barrel of oil or for every gallon of pumped gas be more palatable than a “gas tax” to a public enamored of its military adventures?

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COMMENTARY
The oil dependence that results from present U.S. transportation policies is due at least in part to “resource misallocations” by a complicated political system. Resources are also misallocated due to “perverse incentives” that hide the true costs of oil and stifle the emergence of alternative fuels and modes of transportation.

How oil dependence weakens U.S. national security:
(1) Weakens international leverage;
(2) Entangles the U.S. with unstable and/or hostile states;
(3) Blocks foreign policy action;
(4) Burdens the U.S. military, limits its combat effectiveness and ends up costing blood and treasure;
(5) Weakens the U.S. economy, especially when price fluctuations generate recessions

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Perverse incentives that sustain oil dependence:
(1) Travel is not paid for in the federal tax on the price of fuel but is partially paid in the income tax so the actual cost of driving is not clear to those who do it.
(2) Through political “pork,” taxes fund infrastructure that is not economic, giving taxpayers inaccurate feedback on driving costs.
(3) The enormous military cost of protecting the delivery of oil is not paid at the pump but in income taxes.
(4) Drivers do not get reduced auto insurance premiums for reduced driving so low-mileage drivers are subsidizing high-mileage drivers.
(5) Public transit is often not an appealing option for drivers. It can be inefficient, inconvenient, and uneconomic because: (a) federal tax support doesn’t go to public systems for people served but for routes run, even overcrowded or underused routes, (b) political “pork” and public bond funding goes more to highway building than public transit building; and (c) public transit inefficiencies like poor connections to ghigh traffic venues and failures to upgrade and maintain systems discourage use.

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Details on the 4 principles that guide the policies:
(1) Price the true costs of transportation goods like oil and eliminate advantages to oil from subsidies: The true cost of oil is much higher than the gas pump price and yet there is no obvious signal of this to the consumer. In the absence of accurate price signals, consumers can’t be expected to act rationally.
(2) Base federal investment on and charge for the actual use of federal resources like roads and bridges: The federal tax system is biased toward oil through subsidies it provides and costs it does not impose. Examples: The cost of protecting oil and the cost of harm done to public infrastructure by heavy trucks are spread across society through the income tax instead of born by those who do the most harm like profligate drivers in the first case and truckers in the second.
(3) Make municipalities accountable for better performance: That is where the most traffic is, where the most oil use happens and, in short, where the harm is done.
(4) Deploy technology to make taxpayer investments in transportation more efficient: Taxpayer dollars could work to encourage practices that de-emphasize oil, like connecting public transit with airports and high-use venues and keeping public transport, reliable, clean and safe.

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Details on the 10 policies:

(1) Make the price of fuel include the cost burden for securing oil.
Given the high price the nation pays to protect its oil supply, a federal “national security” fee should be included either on the import of each barrel of oil or on the sale of each gallon of gas. This would give consumers information with which they could make more informed transportation choices.

(2) Deploy High Occupancy/Toll (“HOT”) lanes and create charges for use of oil consuming infrastructure, especially at times of higher congestion.
The basic idea is to increase the cost for high oil consumption driving, like driving alone or during congested hours, and to reward consumption-reduction driving, like riding with passengers, on highways and other federally funded infrastructure. “HOT” lanes and costs for use during congested hours do precisely this. They are ways of resetting the marketplace. Federally funded bridges, tunnels and even the National Highway System should have such consumer signals.

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(3) Maximize public transportation spending to minimize oil consumption.
The most effective spending is on high load carrying public transit. Capital improvement would: (a) Encourage use through improved, more frequent service on well-maintained transport; (b) Encourage use through the addition of new, high load lines and bus rapid transit (BRT) in new high load areas, allowing for flexible, adaptive systems. BRT also costs less to build, operate and maintain and takes less time per mile to build; (c) Encourage use with clean, comfortable, fuel-efficient, fast buses and dedicated right-of-ways and high quality waiting shelters. To boost BRT infrastructure investments, the Federal Transit Administration should create a national BRT Strategic Plan, BRTs should get free access to new roadways and HOT lanes, Surface Transportation Program (STP) funds for BRT support should be increased and planning should put BRT stations in strategic locations.

(4) Allow insurers to reward drivers that reduce oil consumption.
Federal legislation preventing states from allowing insurance companies to provide pay-as-you-drive insurance should be repealed. Current insurance premium structures forces infrequent drivers to subsidize insurance for frequent drivers, a disincentive to habits that limit oil consumption. Research and experimentation on this and other insurer policies with the Federal Transportation Research Board could provide further innovations in uses of auto insurance to discourage oil dependence.

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(5) Provide transit vouchers to low-income households.
Support for more use of public transit would provide passengers for expanding systems until habits develop. Subsidies must be “laser focused” on those who would otherwise be most hurt by the introduction of costs like a national security fuel fee and tolls for the transportation system. Vouchers would be allocated like school vouchers. They would be deposited into fareboxes and be negotiable with competing private and public sector transit systems. This would allow competition yet still allow systems to pay for the subsidies by upping fares on those able to pay. At the same time, federal legislation and incentives should encourage private sector competition.

(6) Reward drivers for “the trip not taken” through encouragement of online employment and transactions.
Policies should encourage telecommuting, online business and internet shopping. Government should facilitate telecommuting and a compressed workweek for the federal workforce. Online interactions with the local, state, and federal government should be facilitated. There should be tax incentives for telecommuting setup and maintenance, like current tax free benefits for workplace parking and transit. Policies should eliminate barriers and disincentives to telecommuting and videoconferencing as business travel substitutes. Congress should, again, use the Transportation Research Board and/or the General Accounting Office to study and price benefits. States should maintain the current no-internet-sales-tax and other incentive policies to encourage online shopping.

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(7) Funnel gas tax revenues to high traffic areas in ways that maximize oil consumption reductions.
More of gas tax revenues must go to cities, where the bulk of the traffic is. This will require “suballocation” of the monies with careful attention to how they are used. A primary application should be the kinds of improvements in public transit on high-load routes described above.

(8) Change local land-use rules and laws to facilitate increased use of public transportation, biking and walking.
On the model of California’s SB 375 legislation, rules and laws should be revised to encourage smart land use and planning for things such as mixed commercial and residential land use and mixed housing to create demographic variety. Aging Baby Boomers and rising Millenials have expressed a clear desire for alternative neighborhoods that facilitate biking and walking. Recent and expected gas pump price spikes and the undependability of the housing market in an unpredictable economy reinforce their preferences.

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In a 2001 survey of developers, 78.2% cited regulatory obstacles as a “significant barrier” to building mixed use developments. 60% called it the “most significant” obstacle. Getting government regulations out of developers’ way would open up lots of economy-boosting “shovel-ready” opportunities similar to those in the successful infrastructure-building Transportation Investment Generating Economic Recovery (TIGER) program.

(9) Use smart traffic management.
Smart vehicle and transportation line management is a direct path to more efficient consumption of fuel. It can be accomplished by retrofitting systems with flow-improving smart technology such as (1) ramp meters, (2) message signs, (3) speedy incident management, (4) road weather management, (5) smart signal control with priority intersection access for public transit, (6) traveler information systems, and (7) vehicle infrastructure integration programs.

Smart technology should be strategically and rapidly deployed. Doing so will require increased funding. Further Department of Transportation analysis of the most cost-effective strategies would be a wise investment.

Light rail lines are already deployed throughout East Asia. click to enlarge

(10) Use electric rail transport where it is cost-effective and cuts oil consumption.
Electric rail lines have their place though the advantages of BRT lines and technology deployment are clear. Transit agency assessment of the relative oil consumption benefits should be the determining factor.

The Department of Transportation’s High Speed Rail initiative, the TIGER program and the Federal Transit Administration New Starts and Small Starts programs offer models of energy-efficient assessment.

Bottom line: You must remember this. Oil is a finite commodity and using it has always led not only to wealth but to grief as well. It was at the heart of the 20th century's bloodiest conflicts and this century is so far following along. The sooner the nation turns to the beautiful friendship with New Energy, efficient ways and electric transportation awaiting it, the better off the U.S. and the rest of the world will be.

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QUOTES
- From the Korin/Lovaas paper: “In recent years it has become increasingly apparent that America’s dependence on oil undermines its national security. It weakens U.S. international leverage, it entangles America with unstable or hostile regimes and it prevents the U.S. from accomplishing its foreign policy objectives. Over-reliance on oil burdens the U.S. military, it undermines combat effectiveness, and it exacts a huge price tag—in dollars and lives. Furthermore, oil dependence undermines economic stability. Every economic recession since World War II was preceded by an oil shock…”

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- From the Korin/Lovaas paper: “The national security and economic vulnerabilities posed by oil dependence stem from oil's status as a strategic commodity second to none. Oil underlies the global economy and, indeed, the American way of life. Transportation is dominated by private vehicle road travel as this is in most cases the only convenient option, and at the same time oil has a virtual monopoly over transportation fuel. In order to strip oil of its strategic status, it is necessary to remove barriers to competition not only amongst transportation fuels but also among transportation modes. In other words, we not only need fuel choice through vehicles that support alternatives but we also need mobility choice.”

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- From the Korin/Lovaas paper: “Our transportation system is highly inefficient, both in terms of oil use and in terms of meeting consumer needs. This is in part due to a complex system of resource misallocations and perverse incentives that thwart competition and hide costs. When it comes to transportation options, Americans don't get what they pay for and don't pay for what they get.”

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- From the Korin/Lovaas paper: “Beyond competition among transportation modes, telecommuting is becoming increasingly pervasive. The choice to take the broadband highway to work, shop or to run errands saves more oil than any mode of transport. While telecommuting is on the rise, there are ways that policy can accelerate the trend. First, government should set a good example by encouraging…telecommuting and a compressed workweek…Next, policymakers should ensure that most interactions with the local, state, and federal government can be handled online…Tax incentives should be provided for telecommuting setup and maintenance costs, similar to the tax free benefits currently provided for other workplace transportation costs (parking and transit use). Other policies may be in order to increase the use…of videoconferencing in lieu of business air travel…States should maintain the current no internet sales tax policy as this facilitates online shopping, and the Congress should ensure individuals are not penalized by state taxes for telecommuting across state lines.”